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Shanghai real estate market enters new era
September 27, 2011, Tuesday
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JAMES Huang is general manager of Shanghai Asia Asset Property Services, a real estate agency specializing in services and property leasing. He founded the Shanghai agency in 1998. At present, Shanghai Asia Asset is one of the top five real estate agencies in the city, and one of the very few to provide quality consulting and after-sales services in Shanghai for both multinational companies and private expatriate customers.
Huang answers some questions about Shanghai's real estate market.
Q: What challenges do you see in Shanghai's property sector?
A: Previously we were faced with challenges; now those challenges are bigger and more exciting, and that's just the beginning.
The growth in the value of Shanghai's real estate market is obvious to everyone. Several factors explain this trend.
In the past years, Shanghai's real estate statistics could be explained by China's increasing international growth, with companies entering Shanghai to gain access to the lucrative China market.
After the 2009 financial crisis, a new era dawned. Since 2010 and going into 2011, the challenge is not just providing higher office buildings for multinational companies.
Q: With new projects being introduced to Shanghai's real estate market, affordable housing shortages, new government policies and uncertain global influences, what does the future hold?
A: One of the key developments in Shanghai's real estate market is the new ownership regulation introduced at the beginning of 2011. This is a major measure as it is intended to slow market growth. This is because many Shanghainese (and some foreigners) have employed a very dynamic housing strategy, investing in at least one or two larger additional residential units. At the same time, many residents are still only able to afford one decent property, if that. These ownership limitations have been introduced to slow down and balance out this inequality.
Q: But what are these limits exactly? And what's going to happen to the owners of multiple properties now?
A: There's no change for owners of multiple properties who bought before January 28, 2011. Of course, they can not purchase more property without breaking the limits. These limits are:
For families residing in Shanghai: one newly purchased second or subsequent residential property; For families not residing in Shanghai: one newly purchased residential property.
No exceptions?
There are some exceptions, mainly depending on whether the average floor area per family member is under 60 square meters. For non-Shanghai residents, qualifying as a "key talent" is an important factor. Authorities provide a comprehensive list of these exceptions. Nevertheless, these are quite minor factors regarding the overall financial flow of the Shanghai market.
Q: Will this housing limit regulation impact the leasing market?
A: Yes, but not in the way you might expect. We are mainly witnessing a soft growth in high-end property leasing. I can't confirm that it's directly due to the new regulation, but nothing has caused leasing prices to decrease over the past few weeks.
Q: So the market value of local projects is still increasing?
A: Yes, but not only that. The global environment also influences local trends. Due to the earthquake in Japan and its consequences, many Japanese expatriates have moved their families to Shanghai. It's a different flow than current Japanese investments, but this is the situation as it stands today. The Shanghainese way of life is quite open to foreign cultures, so the Japanese community can feel at ease here. As for the consequences? It could lead to a shortage of residential properties in Gubei, Changning and Hongqiao, and rising prices in those areas.
Q: What about current and upcoming projects?
A: Current and upcoming projects will definitely change Shanghai. More than 15 years ago, Shanghai was a manufacturing city. Since the 2010 World Expo and the world financial crisis, Shanghai has become a modern worldwide financial and services center. Hongqiao is expected to follow the same route Pudong did over the last decade. Exhibition centers, office buildings, company headquarters, shopping malls: This is the future of Hongqiao. It will deeply impact the west side of Shanghai's real estate market and lead to price rises. On top of that, this area will have extensive and convenient transportation links.
Q: Could you tell us about the impact of the upcoming Disneyland project?
A: The first consequence, which is already well known, is the shortage of land for residential properties, since everything in Pudong is now allocated for the Disney project.
The second and major consequence is that it will change Shanghai into an entertainment city, not just an economic and financial center. This project perfectly follows in the footsteps of the World Expo 2010, which attracted some 70 million visitors. Right now, I would say that several city centers are emerging: Pudong and its logistical hub; Disney, which is an economic area unto itself; the well known downtown, and the Hongqiao area.
Q: What about green projects?
A: I believe that architects and designers will work on "greener" buildings, and local authorities are already becoming more involved in such projects. Reduced pollution and lower energy costs are also factors for developers in promoting these projects.
Asia Asset Property Services is a Hong Kong company, and a member of the global real estate Hope Fluent Group. The company settled in China 12 years ago. It now covers Guangzhou (head office), Shanghai, Beijing, Wuhan, Tianjin and Suzhou. Property management is one of its core businesses.
Huang answers some questions about Shanghai's real estate market.
Q: What challenges do you see in Shanghai's property sector?
A: Previously we were faced with challenges; now those challenges are bigger and more exciting, and that's just the beginning.
The growth in the value of Shanghai's real estate market is obvious to everyone. Several factors explain this trend.
In the past years, Shanghai's real estate statistics could be explained by China's increasing international growth, with companies entering Shanghai to gain access to the lucrative China market.
After the 2009 financial crisis, a new era dawned. Since 2010 and going into 2011, the challenge is not just providing higher office buildings for multinational companies.
Q: With new projects being introduced to Shanghai's real estate market, affordable housing shortages, new government policies and uncertain global influences, what does the future hold?
A: One of the key developments in Shanghai's real estate market is the new ownership regulation introduced at the beginning of 2011. This is a major measure as it is intended to slow market growth. This is because many Shanghainese (and some foreigners) have employed a very dynamic housing strategy, investing in at least one or two larger additional residential units. At the same time, many residents are still only able to afford one decent property, if that. These ownership limitations have been introduced to slow down and balance out this inequality.
Q: But what are these limits exactly? And what's going to happen to the owners of multiple properties now?
A: There's no change for owners of multiple properties who bought before January 28, 2011. Of course, they can not purchase more property without breaking the limits. These limits are:
For families residing in Shanghai: one newly purchased second or subsequent residential property; For families not residing in Shanghai: one newly purchased residential property.
No exceptions?
There are some exceptions, mainly depending on whether the average floor area per family member is under 60 square meters. For non-Shanghai residents, qualifying as a "key talent" is an important factor. Authorities provide a comprehensive list of these exceptions. Nevertheless, these are quite minor factors regarding the overall financial flow of the Shanghai market.
Q: Will this housing limit regulation impact the leasing market?
A: Yes, but not in the way you might expect. We are mainly witnessing a soft growth in high-end property leasing. I can't confirm that it's directly due to the new regulation, but nothing has caused leasing prices to decrease over the past few weeks.
Q: So the market value of local projects is still increasing?
A: Yes, but not only that. The global environment also influences local trends. Due to the earthquake in Japan and its consequences, many Japanese expatriates have moved their families to Shanghai. It's a different flow than current Japanese investments, but this is the situation as it stands today. The Shanghainese way of life is quite open to foreign cultures, so the Japanese community can feel at ease here. As for the consequences? It could lead to a shortage of residential properties in Gubei, Changning and Hongqiao, and rising prices in those areas.
Q: What about current and upcoming projects?
A: Current and upcoming projects will definitely change Shanghai. More than 15 years ago, Shanghai was a manufacturing city. Since the 2010 World Expo and the world financial crisis, Shanghai has become a modern worldwide financial and services center. Hongqiao is expected to follow the same route Pudong did over the last decade. Exhibition centers, office buildings, company headquarters, shopping malls: This is the future of Hongqiao. It will deeply impact the west side of Shanghai's real estate market and lead to price rises. On top of that, this area will have extensive and convenient transportation links.
Q: Could you tell us about the impact of the upcoming Disneyland project?
A: The first consequence, which is already well known, is the shortage of land for residential properties, since everything in Pudong is now allocated for the Disney project.
The second and major consequence is that it will change Shanghai into an entertainment city, not just an economic and financial center. This project perfectly follows in the footsteps of the World Expo 2010, which attracted some 70 million visitors. Right now, I would say that several city centers are emerging: Pudong and its logistical hub; Disney, which is an economic area unto itself; the well known downtown, and the Hongqiao area.
Q: What about green projects?
A: I believe that architects and designers will work on "greener" buildings, and local authorities are already becoming more involved in such projects. Reduced pollution and lower energy costs are also factors for developers in promoting these projects.
Asia Asset Property Services is a Hong Kong company, and a member of the global real estate Hope Fluent Group. The company settled in China 12 years ago. It now covers Guangzhou (head office), Shanghai, Beijing, Wuhan, Tianjin and Suzhou. Property management is one of its core businesses.
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